Analyst Says Dell’s Momentum Is Real, But Valuation Is Risky with Stock Up 250% YTD Thomas RichmondMon, June 1, 2026 at 8:55 PM UTC 0 Justin Sullivan / Getty Images News via Getty ImagesQuick Read Truist analyst Matthew Nicknam maintains a HOLD on Dell (DELL) due to elevated valuation parity with the S&P 500, a multiple shift from Dell’s historical 9x P/E average.
Analyst Says Dell’s Momentum Is Real, But Valuation Is Risky with Stock Up 250% YTD
Thomas RichmondMon, June 1, 2026 at 8:55 PM UTC
0
Justin Sullivan / Getty Images News via Getty ImagesQuick Read -
Truist analyst Matthew Nicknam maintains a HOLD on Dell (DELL) due to elevated valuation parity with the S&P 500, a multiple shift from Dell’s historical 9x P/E average.
Nicknam suggests investors look at networking companies such as Hewlett Packard Enterprise (HPE), Cisco Systems (CSCO), and Arista Networks (ANET) for better risk-adjusted exposure to AI infrastructure growth, with superior margins and durability.
The analyst who called NVIDIA in 2010 just named his top 10 stocks and Dell Technologies wasn't one of them. Get them here FREE.
Dell Technologies (NYSE:DELL) has become one of the market's biggest AI winners. The stock has rocketed over 250% year to date and more than 100% in the past month alone, fueled by explosive demand for AI infrastructure.
Yet even some bulls are beginning to question how much future growth is already reflected in the share price. Speaking on CNBC's Closing Bell: Overtime, Truist analyst Matthew Nicknam laid out the big problem with Dell right now:
"Dell is seeing momentum, no question. If we think about demand across each of their end markets, it's there. Supply is tight. Dell has got it." The issue, in his view, is what investors are now paying for that growth. "The stock's now trading in line with the S&P multiple. This is a stock that historically has been about half of the S&P, about 9 times average P/E if you think back to the last 5 years. So I do think valuation's a little bit stretched at these levels."
The analyst who called NVIDIA in 2010 just named his top 10 stocks and Dell Technologies wasn't one of them.Get them here FREE.
The Business Is Firing on All Cylinders
Dell's recent earnings report gave investors plenty to be excited about. For fiscal Q1 2027, the company generated $43.84 billion in revenue, up 87.5% year over year, while non-GAAP earnings per share reached $4.86, well ahead of the $2.96 consensus estimate.
The biggest driver was AI infrastructure. AI-optimized server revenue climbed to $16.13 billion, representing growth of more than 750% year over year. During the quarter, Dell also booked approximately $24.4 billion in AI-related orders, highlighting the extraordinary demand environment across enterprise and hyperscale customers. Management responded by raising full-year guidance, projecting approximately $167 billion in revenue and roughly $60 billion in AI-optimized server sales during fiscal 2027.
The results reinforced the view that Dell has become one of the primary beneficiaries of the AI infrastructure buildout.
Advertisement
Four Reasons Nicknam Stays Cautious on Dell
Nicknam flagged a cluster of forward risks for Dell:
Current valuation sits at a similar multiple to the S&P 500 despite trading around half the market's multiple over the past 5 years.
Rising memory and input costs will compress margins. Gross margin was already compressed to 17.8% last quarter on the AI server mix shift.
Pull-forward dynamics reminiscent of the post-COVID inventory cycle could lead to demand moderation in fiscal 2028.
PC sales could decelerate from high-teens to low-20s growth to the low single digits next year.
Nicknam expects the current momentum to extend for two to three more quarters before the cycle pressure shows up in numbers.
The Case For Networking Instead
Nicknam's preferred way to play AI infrastructure is through networking companies, arguing they offer stronger margins and potentially more durable competitive positions. He says those names carry "a little bit more gross margin, a little bit more stickiness, I'd argue durability" than Dell.
The math backs the framing. Hewlett Packard Enterprise (NYSE:HPE) trades at a forward P/E of 15x, with its networking segment posting $2.71 billion in revenue, up 151.5% YoY in Q1 FY26 following the Juniper deal. Cisco Systems (NASDAQ:CSCO) trades at a forward P/E of 25x and raised its FY26 AI infrastructure order expectations to $9 billion from $5 billion. Arista Networks (NYSE:ANET) trades at a richer forward P/E of 43x but generates operating margins of 42.7% and profit margins of 38.3%, far above Dell's operating margin of 8.34%.
The Next Test Arrives This Week
Investors will get another important data point soon. HPE is scheduled to report fiscal Q2 2026 results after the market closes on June 1. The report may provide fresh insight into whether demand for AI infrastructure remains as strong across the broader ecosystem as Dell's recent results suggest.
Nicknam thinks Dell is firing on all cylinders, but the entry price now demands that the cycle keep running at full throttle, and history suggests Dell shareholders have rarely had to pay a market multiple to participate. For investors who want the AI infrastructure exposure without the risk of a valuation reset, the 3 networking companies, Hewlett Packard, Cisco, and Arista Networks, could be worth a closer look today.
The analyst who called NVIDIA in 2010 just named his top 10 AI stocks
This analyst's 2025 picks are up 106% on average. He just named his top 10 stocks to buy in 2026. Get them here FREE.
Source: "AOL Money"
Source: Money
Published: June 2, 2026 at 01:18AM on Source: MANUEL MAG
#ShowBiz#Sports#Celebrities#Lifestyle
Post a Comment